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NUCLEAR POWER: RISKY INVESTMENT

South Africa is facing a major challenge that requires bold and proper strategic decisions:
It needs to provide a reliable supply of affordable energy for its economy, and at the same time it
has to avoid catastrophic climate change by taking an active part in the global effort to reduce
greenhouse gas emissions.

The new multi-billion investments in energy will shape the sector for coming decades.
It is therefore vital to make sure that those investments are re-directed in favour of technologies
that are capable of providing a secure supply of sustainable energy.

Nuclear power, contrary to the promises of the industry, has repeatedly failed to deliver.
Both historical evidence and recent experience proves that it is a highly expensive and
risky investment.

High and rising costs

Historical evidence: costs three times higher than promised

According to the US Department of Energy, the total estimated cost of 75 of the US reactors currently in operation was USD 45 billion, but actual costs came to USD 145 billion, more than three times initial estimates [1].

In India, the country with most recent experience of larger nuclear construction, final costs of the last 10 reactors have been on average three times over budget [2].

The most recent pressurized water reactors built in Europe – the two 1,000 MW reactors in Temelín, Czech Republic, which were put into operation in 2001 – recorded costs overruns from 35 to over 100 billion CZK, again three times over budget [3].

+++ Current experience: prices are rising

The global nuclear industry has been promoting new reactors as mature and cost effective, promising investment costs around 2,000 USD per installed kW [4]. Experts however warn that real costs will be much higher. Moody’s agency published an October 2007 analysis that puts estimates at between 5,000 and 6,000 USD/kW [5]. Since then, costs have kept on rising, so the most recent price tag used by Moody’s in May 2008 was 7,500 USD/kW [6].

Standard & Poor’s research from October 2008 shows that new nuclear investment costs rose by 231 % compared with the year 2000 [7], more than for any other energy technology [8].

Several US utilities announced updated cost estimates of new nuclear reactor projects this year: they doubled or even tripled to previous quotes. For example in August 2008, Georgia Power informed Public Service Commission that two 1,100 MW reactors in Vogtle would cost 14 billion USD [10]. Those new industry estimates translate to between 5,400 and 8,100 USD/kW. And real construction has not even started yet.

The experience of two French reactors, EPRs, currently under construction in Finland and France, is also alarming. One 1,600 MW unit for Finland was promised to cost 2.5 billion EUR in 2002, the contract was signed for 3.2 billion EUR in 2005, and today – with at least three more years of construction to go – the actual budget already exceeded 5 billion EUR (6.5 billion USD) [11], double the initial estimate.

Big delays in delivery

It takes many years of planning, approval and construction before new reactors start generating
electricity, often more than a decade. During this time other, more effective and flexible options
could already supply much needed power to the grid.
Historical evidence: years of delays
Analysis undertaken by the World Energy Council has shown a worldwide trend in increasing
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construction times for nuclear reactors. While the construction time was 60 to 80 months in
the 1960s and 1970s, it rose to over 100 months in the period from 1985 to 2000 [12].
Statistics of 55 reactors build by Westinghouse in US shows an average delay of 4.5
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years against planned construction schedule [13].
Current experience: years of delays
The new French EPR units in Finland and France have been seriously hit by construction
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problems, failures to meet quality and safety requirements in building, fabrication of
components as well as welding. The EPR in Olkiluoto-3, Finland, has recently announced its
fourth delay: originally scheduled to be operational in April 2009, it is now already 3 years
delayed after three years of construction [14]. The second EPR whose construction started
only in December 2007 in Flamanville-3, France, is reported to be already 1 year behind
schedule [15].
It was announced in November 2008 that the new reactor in Japan, under construction in
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Ohma, will be at least two and a half years delayed [16].
The 3,200 MW to 3,500 MW of PWR capacity that ESKOM plans to build in first phase
would easily cost between 25 and 28 billion USD (260 to 290 billion rand) based on the
current industry estimates. It is not likely that it can start generating electricity before
2018, therefore South Africa cannot rely on it to cover energy gap in next ten years.
Risks for investors
Various financing and economic institutions, such as Citigroup Global Markets [17],
Standard & Poor’s [7], Fitch Ratings [18] or Moody’s [6], recently listed significant risks related to
new nuclear reactor projects and investments. These include:
Uncertain construction costs
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Potential for construction delays
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Possible safety problems
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Complications with radioactive waste management
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Other operator’s liabilities, for example for damages caused by operation and accidents
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Risk of poor performance due to technical or licensing issues
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Public opposition
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Standard & Poor’s concluded in October 2008 that for new nuclear construction projects „risks
remain uncertain but significant“ [7].
Better solutions: efficiency and renewable sources
South Africa can gain much better by investing into improved energy efficiency and development
of renewable sources, such as wind and solar power – these are abundant, clean and avoid
dependency on imported fuels. Even economically they do better than expensive and dirty
nuclear power [19]. As Ferran Tarradellas Espuny, a spokesman for the EU Energy
Commissioner, said in October 2008 about renewable energy projects in South East Asia: „You
should go for it. It is cheaper than investing in nuclear development“ [20].
For more information contact:
Jan Beránek, Nuclear Energy Project Leader, Greenpeace International,
email: gro.ecaepneerg|kenareb.naj#gro.ecaepneerg|kenareb.naj, tel.: +31 651 109 558, http://www.greenpeace.org
References:
[1] Department of Energy, ‘An analysis of nuclear power construction costs, energy information’ Administration of the US, DOE/EIA-0411, 1986.
[2] M.V.Ramana, Antonette D'Sa, Amulsa K.N.Reddy, 'Economics of nuclear power from heavy water reactors', Economics and Political Weekly, April 2005
[3] var. cit. in: Steven Thomas et al, The Economics of Nuclear Power, Greenpeace, October 2007
[4] World Energy Outlook 2007, IEA/OECD, Paris, November 2007
[5] New Nuclear Generation in the United States: Keeping Options Open vs Addressing An Inevitable Necessity, Moody’s Corporate Finance, New York, October 2007
[6] New Nuclear Generating Capacity: Potential Credit Implications for U.S. Investor Owned Utilities, Moody’s Corporate Finance, New York, May 2008
[7] Construction Costs To Soar For New U.S. Nuclear Power Plants, Standard & Poor’s, Ratings Direct, New York, 15 October 2008
[8] Joe Romm: The Self Limiting Future of Nuclear Power, Center for American Progress Action Fund, Washington, June 2008
[9] FPL 2007. Direct Testimony of Steven D. Scroggs, Florida Power & Light Company, before the Florida Public Service Commission, October 16, 2007,
[10] Nuclear News Flashes, Platts, August 1, 2008
[11] Ann McLachlan: Big cost hikes make vendors wary of releasing reactor cost estimates, Nucleonics Week , Platts, 11 September 2008
[12] World Energy Council, Alexandro Clerici, ABB Italy, ‘European regional study group, the future role of nuclear energy in Europe’ 13 June 2006
[13] Jan Beránek, testimony to the Czech Governmental Committee for Independent Inquiry to Temelin Nuclear Project, Prague, May 2000
[14] Areva in talks with TVO over EPR delays, Financial Times, October 16 2008
[15] Flamanville's EPR reactor delayed to 2013, Reuters, 12 November 2008
[16] J-Power Delays Oma Nuclear Plant Start by 2 1/2 Years, 11 November 2008, Bloomberg
[17] Nuclear Energy – State of the Debate, Citi Investment Research, London, 6 June 2008
[18] U.S. Nuclear Power: Credit Implications, Fitch Ratings, 2 November 2006, New York
[19] DLR : Energy Revolution 2008, Greenpeace & EREC, November 2008, http://www.energyblueprint.info
[20] Europe advises Asean against nuclear energy, Bangkok Post, 12 October 2008